Economic week ahead: Assessing global trade

Here is your guide to these and other significant economic releases likely to drive markets in the week ahead:

North America
One number is likely to preoccupy American investors more than any other in the week ahead, 14 164.53. That figure represents the all-time high achieved by the Dow Jones Industrial Average – America's most widely recognised index – in October 2007.
After a 1.08% surge on Friday, the Dow closed at 14 009.79, tantalisingly close to the record.

While markets await news that the record has been broken, they will have to satisfy themselves with the far less headline-grabbing factory orders, productivity, trade and other figures scheduled for release over the coming days.

This week's short list of data releases begins on Monday with December's factory orders numbers. Markets expect the data to show that orders increased 2.2%, month on month, in December following zero growth in November.

On Tuesday, analysts surveyed by Dow Jones expect the Institute for Supply Management's non-manufacturing index to drop to 55 from last month's 55.7. Any reading above 50 indicates expansion in the non-manufacturing economy.

On Thursday, attention will shift to last week's jobless claims numbers and fourth quarter productivity and labour costs data. Analysts expect jobless claims to drop to 360 000 from 368 000 in the prior week. Productivity is expected to have declined 1.6%, quarter on quarter, during the last three months of 2012. Unit labour costs are predicted to have increased 3.2% over the same period.

Finally, on Friday, government trade figures are expected to show that America's trade deficit narrowed to $45.4-billion in December from $48.7-billion in November.

Europe
Services purchasing managers' index readings for Germany and France and composite readings for the eurozone as a whole are the first big items on Europe's data calendar this week. Markets expect indices in France and the eurozone to remain in contraction territory. Germany's measure is expected to continue to signal expansion.

On Thursday, both the European Central Bank (ECB) and Bank of England (BOE) will hold policy meetings. No rates changes are expected from either institution. Markets expect the ECB to leave its benchmark rate on hold at a record low 0.75% and for the BOE to keep its base rate steady at 0.5%. Markets anticipate no changes to the BOE's £375-billion asset purchase programme either.

Economists and investors will be paying close attention to the ECB's post meeting press conference to see if Mario Draghi, the bank's chief, makes any comments about the euro. Europe's common currency has appreciated to its highest level against the dollar since November 2011 and concerns are growing that the euro's recent strength may impede the region's economic recovery. Markets will also be watching incoming BOE governor Mark Carney's testimony before Britain's Treasury Select Committee on his monetary policy outlook.

Thursday will also bring December's industrial output figures from Germany. Markets expect a meagre 0.1% monthly increase in production, down from 0.2% in November.

On Friday, Germany will report December's trade balance figures. Markets expect the continent's largest economy to have recorded a €14.9-billion trade surplus, down from €17-billion in November.

Asia
A slew of closely followed data from China – the world's second largest economy – will dominate Asia's economic calendar this week. Officials at the country's National Bureau of Statistics will release December's consumer and producer inflation, imports, exports, trade balance, money supply and lending data on Friday.

China's annual consumer inflation rate accelerated to a seven-month high of 2.5% in December, but is expected to have eased to 2.1% in January. The country's producer price index fell 1.9% in December from a year earlier – its 10th consecutive month of decline - and markets are forecasting a 1.6% decline in January.

After seven consecutive quarters of slowdown, China's export growth rebounded to a seven-month high in December, surging 14.1% compared to a year earlier. Economists attributed the strong performance to exporters clearing year-end orders and not necessarily indicative of trend that will continue into 2013. Nevertheless, markets expect January's numbers to paint an equally positive picture. Consensus is for a 17.1% year-on-year gain.

The country's imports grew 6% in December, bringing China's trade surplus to a two-month high of $31.6-billion. Economists expect a 23.5% imports surge in January to reduce the country's trade surplus to $24.2-billion.

December's money supply and new yuan lending data were also positive. M2 money supply grew 13.8%, year on year, while new loans totalled 454.3-billion yuan, bringing the annual total to 8.2-trillion yuan in loans disbursed. Markets expected money supply grew 14.2% year on year, and that bank lending swelled to 1.0-trillion yuan in January.

Latin America
Monday will bring producer price index (PPI) figures from Colombia, vehicle sales figures from Venezuela and monthly consumer price index (CPI) readings from Brazil. Markets expect Brazil Fipe index to show a quickening in the monthly pace of consumer price rises from 0.78% in December to 1.06% in January.

On Tuesday, Argentina and Chile will release vehicle sales tallies, Venezuela will release CPI readings, Mexico will release manufacturing and non-manufacturing gauges and Chile's central bank will report its economic activity index, a monthly GDP proxy. Analysts at 4Cast expect Mexico's IMEF manufacturing and non-manufacturing indices to show slight declines and Chile's economic activity index to slow to 3.7% year on year growth in January.

Colombia's latest CPI numbers will follow on Wednesday along with consumer confidence readings from Mexico and more inflation figures from Brazil. Markets expect no change in Mexico's consumer confidence index. Brazil's commodity price index is expected to have fallen 2.2% on a monthly basis in January.

On Thursday, Peru's central bank is expected to leave the country's benchmark rate on hold at 4.25%. And on the data calendar, Chile will report import, export and trade balance figures and Mexico and Brazil will report inflation measures.

Chile's trade balance is expected to fall into deficit. Mexico's inflation rate is thought to have picked up from 0.23% in December to 0.30% last month. Gross fixed investment and vehicle sales figures in Mexico and CPI readings in Chile will close out the region's economic week on Friday.

Middle East and Africa
Fourth quarter unemployment figures – scheduled for release on Tuesday – and December's manufacturing production figures – scheduled for release on Thursday – are the big items on South Africa's economic calendar this week. Markets expect employment data to show that roughly one quarter of the country's potential workers remains unemployed and that manufacturing production – which accounts for roughly 15% of South Africa's GDP – slowed to 3.1% growth in December from 3.4% in November.

Elsewhere on the continent, Nigeria's statistics bureau will release the government's economic outlook for 2013-2016 and review of 2012 and Uganda's central bank will announce its latest interest rates decision on Monday.

Nigeria's economy is expected to expand by around 7% in 2013. The country has the potential to expand at a much faster rate, but is unlikely to do so unless infrastructure is improved and business costs are lowered.

The Central Bank of Uganda reduced its benchmark central bank rate by 11-percentage points in 2012, but is expected leave rates on hold at 12% at this month's policy meeting, despite a recent easing of inflation pressures. Consumer price inflation – which peaked at 30.4% in October 2011 – slowed to 4.9%, year on year, in January from a revised 5.3% in December.

Although exact release dates have not been set, Ghana's gross reserves figures, Morocco's unemployment rate and Uganda's money supply figures are also expected this week. And on the political front, two years later than scheduled, Zimbabwe's draft constitution is expected to be tabled in parliament.

Matt Quigley

Matt Quigley writes the weekly economic preview for the Mail & Guardian.
His blog on the South African economy can be found at www.thoughtleader.co.za/mattquigley
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